Nifty Bank on Monday hit a fresh record high and crossed the 44,400 level. The index gained over 12 per cent in the last two months. Three stocks – State Bank of India, ICICI Bank Ltd and Kotak Mahindra Bank – accounted for over 60 per cent of the increase in the Nifty Bank’s market capitalisation over the past two months.
With this, the index has now gained over 6,000 points from its March 16 low of 38,613. From its 52-week low of 32,290 on June 17, 2022, the Nifty Bank index has gained over 12,000 points. It has taken 113 sessions for the Nifty Bank index to surpass its previous all-time high.
Over the last two months, most of the recovery on the Nifty Bank index has been led by ICICI Bank and HDFC Bank. Individually, these stocks are up 15 per cent and 6 per cent respectively during the same period.
11 out of the 12 constituents of the Nifty Bank have contributed to this recovery over the last two months. However, Federal Bank has been an underperformer, declining by 1.1 per cent over this period. A recent recovery has taken Bandhan Bank into positive territory over the last two months.
From its 52-week low of 32,290 on June 17, 2022, the Nifty Bank index has gained over 12,000 points. Even over the last 12-month period, most of the gains on the Nifty Bank have been led by ICICI Bank, HDFC Bank and Axis Bank.
Over a 12-month period, while 11 of the 12 index components have gained, Bandhan Bank has been an underperformer, declining nearly 16 per cent, contributing to nearly 100 points to the downside.
According to a recent statement by S&P Global Ratings, the profitability of the Indian banking sector is expected to stabilise at a robust level, while there will be continued improvement in asset quality.
“Indian banks’ earnings will likely remain healthy. The sector has improved substantially in the past seven years, from a period when many public-sector lenders were grappling with bad loans,” S&P Global Ratings said in its note.
S&P Global Ratings has highlighted that the Indian banking sector is experiencing a strong recovery, with lenders recently reporting their best results in 10 years. The rating agency anticipates that the profitability of the sector will stabilise at a healthy level, and banks will continue to witness improvements in asset quality.
The positive trend in Indian banking profitability is attributed to higher net interest margins and reduced credit costs.
What Should Investors Do?
Sumeet Bagadia, Executive Director at Choice Broking said: “Nifty Bank made intra-week high of 44,095.25, before settling last week at 44,018. The index closed the week with 0.06 per cent gain. It formed a bullish candle on the weekly chart. On the daily chart, the index is sustaining above 50-EMA, which would be acting as an important support level. The RSI stood at the 63 level while the MACD was skewed on the positive side. Among private banks, ICICI Bank and Axis Bank could be a front runner. In the PSU banking space, SBI, Canara Bank ana Bank of Baroda may reveal some expansions in the coming week.”
On the technical front, analysts believe Nifty Bank may face intraday resistance at 44,194, 44,370 and 44,673 levels, while support is placed at 43,715, 43,413 and 43,237 levels.
ICICI Direct expects the index to surpass gradually head towards 45400 levels in a non-liner manner in the coming month as it is a 123.6 per cent extension of the entire December 2022-March 2023 decline (44151-38613).
“However, after the recent sharp up move of 15 per cent in the just eight weeks the weekly stochastic are at an overbought territory with a reading of 93. Hence, a breather of couple of weeks in the broad range of 44200-42500 cannot be ruled out. It should not be seen as negative. Instead dips should be used as buying opportunity,” ICICI Direct said.
Meanwhile, the benchmark indices Sensex and Nifty were also trading with strong gains. The Sensex was trading 440.04 points, or 0.70 per cent, higher at 62,941.73, and the Nifty rallied 116.55 points, or 0.63 per cent, to 18,615.90.
The life-time high for Nifty is 18,887.60, and for Sensex is 63,583.07.